Renewable energy consumption, CO2 emissions and trade balance nexus in OECD countries: evidence from ARDL bounds approach

Abstract

Purpose Renewable energy is at the forefront of countries’ concerns due to its global economic and environmental impacts. Previous studies have thoroughly examined the impact of renewable energy on overall national income, and this paper aims to shed light on an indicator that has received insufficient attention in research regarding its impact on economic growth, using data from 2000 to 2018. Design/methodology/approach This study examines the causal relationship between trade balance, renewable energy consumption and CO2 emissions per capita in Organization for Economic Cooperation and Development (OECD) countries using an auto regression distributed lag model (ARDL) and Johansen Cointegration Test. Findings The findings reveal that there is evidence of a long-run and short-run cointegrating relationship and that renewable energy consumption in the long run impacts the trade balance positively and in the short run negatively. Originality/value Therefore, bioenergy trade between countries and local investment should be prioritized to increase the trade balance surplus, since many of OECD countries suffer from deficit problems.